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Inspection, Search, Seizure and Arrest Under GST

1. In any tax administration the provisions for Inspection,
Search, Seizure and Arrest are provided to protect the
interest of genuine tax payers (as the Tax evaders,
by evading the tax, get an unfair advantage over the
genuine tax payers) and as a deterrent for tax evasion.
These provisions are also required to safeguard
Government’s legitimate dues. Thus, these provisions
act as a deterrent and by checking evasion provide a
level playing field to genuine tax payers.

2. It may be mentioned that the options of Inspection,
Search, Seizure and Arrest are exercised, only in
exceptional circumstances and as a last resort, to
protect the Government Revenue. Therefore, to ensure
that these provisions are used properly, effectively
and the rights of tax payers are also protected, it is
stipulated that Inspection, Search or Seizure can only
be carried out when an officer, of the rank of Joint
Commissioner or above, has reasons to believe the
existence of such exceptional circumstances. In such
cases the Joint Commissioner may authorise, in writing,
any other officer to cause inspection, search and
seizure. However, in case of arrests the same can be
carried out only where the person is accused of offences
specified for this purpose and the tax amount involved
is more than specified limit. Further, the arrests under
GST Act can be made only under authorisation from the
Commissioner.

3. The circumstances which may warrant exercise of
these options are as follows: -

(i) Inspection

‘Inspection’ is a softer provision than search which
enables officers to access any place of business
or of a person engaged in transporting goods or
who is an owner or an operator of a warehouse
or godown. As discussed above the inspection
can be carried out by an officer of CGST/SGST only
upon a written authorization given by an officer
of the rank of Joint Commissioner or above. A
Joint Commissioner or an officer higher in rank
can give such authorization only if he has reasons
to believe that the person concerned has done
one of the following actions:

(a) Suppression of any transaction relating to
supply of goods or services or stock in hand

(b) Claimed excess input tax credit

(c) Contravention of any provisions of the Act or
the Rules to evade tax

(d) Transporting or keeping goods which escaped
payment of tax or manipulating accounts or
stocks which may cause evasion of tax
Inspection can also be done of the conveyance,
carrying a consignment of value exceeding specified
limit. The person in charge of the conveyance has to
produce documents/devices for verification and allow
inspection. Inspection during transit can be done even
without authorisation of Joint Commissioner.

(ii) Inspection in movement

(a) Any consignment, value of which, is
exceeding Rs. 50,000/-, may be stopped at
any place for verification of the documents/
devices prescribed for movement of such
consignments.

(b) If on verification of the consignment, during
transit, it is found that the goods were removed
without prescribed document or the same
are being supplied in contravention of any
provisions of the Act then the same can be
detained or seized and may be subjected to
penalties as prescribed.

(c) To ensure transparency and minimise hardships
to the trade, the law provides that if during
verification, in transit, a consignment is held
up beyond 30 minutes the transporter can
feed details on the portal. This will ensure
accountability and transparency for all such
verifications. Moreover, for verification during
movement of consignment will also be done
through a Digital interface and therefore the
physical intervention will be minimum and as
has already been mentioned that in case of a
delay beyond 30 minutes the transporter can
feed the details on the portal.

(iii) Search & Seizure

The provisions of search and seizure also provides
enough safeguards and the GST Law stipulates that
search of any place of business etc. can be carried
out only under authorisation from an officer not
below the rank of Joint Commissioner and if he has
a reason to believe that the person concerned has
done at least one of the following:-

(a) Goods liable to confiscation or any documents/
books/record/things, which may be useful for or
relevant to any proceedings, are secreted in any
place then all such places can be searched

(b) All such goods/documents/books/record/things
may be seized, however, if it is not practicable
to seize any such goods then the same may be
detained. The person from whom these are
seized shall be entitled to take copies/extracts
of seized records

(c) The seized documents/books/things shall be
retained only till the time the same are required
for examination/enquiry/proceedings and if
these are not relied on for the case then the
same shall be returned within 30 days from the
issuance of show cause notice

(d) The seized goods shall be provisionally released
on execution of bond and furnishing a security
or on payment of applicable tax, interest and
penalty

(e) In case of seizure of goods, a notice has to be
issued within six months, if no notice is issued
within a period of six months then all such goods
shall be returned. However, this period of six
months can be extended by Commissioner for
another six months on sufficient cause.

(f) An inventory of the seized goods/documents/
records is required to be made by the officer and
the person, from whom the same are seized,
shall be given a copy of the same.

(g) To ensure that the provisions for search and
seizure are implemented in a proper and
transparent manner, the Act stipulates that
the searches and seizures shall be carried out
in accordance with the provisions of Criminal
Procedure Code, 1973. It ensures that any search
or seizure should be made in the presence of
two or more independent witnesses, a record
of entire proceedings is made and forwarded to
the Commissioner forthwith.

(iv) Arrests

In the administration of taxation the provisions for
arrests are created to tackle the situations created
by some unscrupulous tax evaders. To some these
may appear very harsh but these are necessary for
efficient tax administration and also act as a deterrent and instil a sense of discipline. The provisions
for arrests under GST Law have sufficient inbuilt
safeguards to ensure that these are used only under
authorisation from the Commissioner. Besides
this, the GST Law also stipulates that arrests can
be made only in those cases where the person is
involved in offences specified for the purposes of
arrest and the tax amount involved in such offence
is more than the specified limit. The salient points
of these provisions are:

(a) Provisions for arrests are used in exceptional
circumstance and only with prior authorisation
from the Commissioner.

(b) The law lays down a stringent criteria and procedure
to be followed for arresting a person. A person can
be arrested only if the criteria stipulated under
the law for this purpose is satisfied i.e. if he has
committed specified offences (not any offence)
and the tax amount is exceeding rupees 200 lakhs.
However, the monetary limit shall not be applicable
if the offences are committed again even after
being convicted earlier i.e. repeat offender of the
specified offences can be arrested irrespective of
the tax amount involved in the case.

(c) Further, even though a person can be arrested for
specified offences involving tax amount exceeding
Rs. 200 lakhs, however, where the tax involved is
less than Rs. 500 lakhs, the offences are classified
as non-cognizable and bailable and all such arrested
persons shall be released on Bail by Deputy/
Assistant Commissioner. But in case of arrests for
specified offences where the tax amount involved
is more than Rs. 500 lakhs, the offence is classified
as cognizable and non-bailable and in such cases
the bail can be considered by a Judicial Magistrate
only.